YouTube vs. Disney: Who Needs Whom More?

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1:10So cut the bull spend. Advertise on LinkedIn, the network that works for you. Spend$250 on your first campaign on LinkedIn ads and get a$250 credit for the next one. Just go to linkedin.com slash the town. That's linkedin.com slash the town. Terms and conditions apply. This summer, FanDuel is the best place to bet on goals. Including equalizers, balls, headers. Every goal is worth more on FanDuel. So let there be goals. New customers get$350 in bonus bets guaranteed when you bet$5 for seven days. 21 plus in present and select states. First online real money wager only. Minimum$5 wager required for seven consecutive days.

1:50$5 first deposit required. Bonus issued as non-withdrawable bonus bets, which expires seven days after receipt. Restrictions apply. See full terms at fanduel.com slash sportsbook. Gambling problem? Call 1-800-GAMBLER or 1-800-MY-RESET. It is Monday, November 10th. As longtime listeners know, there are few genres of Hollywood business news that I hate more than carriage disputes. We all know how they go. TV channel owners want a big fee increase in a new deal. They usually expire right around the major sporting events of the season or the start of the NFL season. Distributors push back. They go down to the wire.

2:23Sometimes the networks even go dark for a few days or weeks. Then a negotiation breakthrough and everyone's friends again. This latest standoff between Disney and YouTube TV, which is now in its second week of no ESPN or ABC or FX for the 10 million subscribers that get that service, including Craig. He's very pissed. This fight will probably end soon, but there's a few factors here that make this one a little bit more interesting. Namely, it's YouTube. It's owned by Google, which makes the vast majority of its$350 billion in annual revenue on stuff that is not YouTube TV. Maybe the fourth largest cable TV provider in the US, but unlike Charter or Comcast, the traditional cable companies, YouTube can't afford to wait this out or just not carry the Disney channels to make a point.

3:09In other words, as my puck colleague Julia Alexander wrote last week, Disney probably needs YouTube more than YouTube needs Disney. But on the other hand, this fight coincides with the launch of the ESPN standalone app, where you can get all those sports without a cable subscription. Disney would very much like sports fans to pay for that app. There's Hulu Live and FUBU, services that Disney now owns. So the conspiracy theory out there is that Disney may actually want to fight with YouTube and get more people into the ESPN app. Not sure about that. By most estimates, it's a$2 billion a year relationship with YouTube TV, not something you want to just go away.

3:47But the cost of sports rights for ESPN are going up by a lot. So Disney probably should get more from its carriers, right? And YouTube TV is a growing part of YouTube. They call it a priority at the company. And if Google really wants to own the entire video ecosystem, the subscription channels business is a decent sized part of that. So incentives on both sides here, who's going to win this fight? We've got Lucas Shaw from Bloomberg back again. Today, we'll discuss a little bit of the Warner Brothers sale update, but mostly it's Disney versus YouTube and who's got the leverage now. From The Ringer and Puck, I'm Matt Bellany and this is The Town.

4:29All right, we are here with Lucas Shaw from Bloomberg. Welcome back, Lucas. It's been a while. I was off last week, missed a little event that happened with the Los Angeles Dodgers. How many times have you been served on social media with videos of the Will Smith home run, the Miguel Rojas home run, or the very close play at the plate? My entire feed on Twitter, threads, and Instagram, mostly Twitter and threads, I'm only getting Dodger material. But mine goes way deeper than just those three. Oh, yeah, yeah. I'm sure. The Freddie Freeman doing the worm, the Quique Hernandez interviews, all of it.

5:08It's been a pretty glorious week and a half on social media for me. Yeah, I have to admit something. So I left your birthday party on Saturday night. Yeah, but it was my birthday. I shared it with Kris Jenner. We had the same birthday party. And as my fiance basically napped in the car next to me, I sat there and rewatched. I was like, what can I do for the 40-minute drive home? I've listened to a lot of music today, and I rewatched innings one, two, and maybe part of three of Game 7 of the World Series because I'm a lunatic. That's both sad and 100 % predictable. Yes. So, all right. But this is not a Dodgers podcast.

5:44This is an entertainment business podcast. And we are talking today a couple topics. But first, let's dive into the YouTube Disney standoff. This is now in its 10th day. The 30th was the first day of this carriage blackout. I hate covering these things. They're the worst. They are the worst because they're always resolved. the breathless headlines, the saber rattling, the statements. Every single one of these is going to change the television business forever. And yet, I will admit, I went into this and when I'd have conversations with people at Disney and YouTube, I'd be like, okay, is this going to end like all the others where you're going to saber rattle and then you'll end up settling and nothing will really change.

6:27But this has gone on way longer and gotten far more acrimonious than I thought it was going to. because you have arguably the two most powerful companies on either side of this type of negotiation negotiated. Yes, and the incentives are just so off here. I mean, back in the day when we would cover these things, these businesses were so important to both sides of the equation. Obviously important to the channel owners. They need the carriage to make the money that justifies the costs of content and the whole thing. But the cable companies, DirecTV, Comcast, Spectrum, they needed it just as much.

7:09And now YouTube TV is a tiny warch on the inside of the palm of Google. Like it could be excised and the share price would do zero. What kind of a situation does that create? Like, okay, you want to fight with us? Fight with us. Okay, you're right that obviously this dispute does not matter to Alphabet Incorporated. It does not. $350 billion in revenue each year. You know how much of that comes from YouTube TV? But they do care a lot about YouTube and YouTube TV has become a huge priority for YouTube. So I do think it matters. But you were trying to tee up that you think the balance of power is off such that Disney needs YouTube more than YouTube needs Disney, right?

7:56I think that is 100 % true. Right. Which is why when you normally see these disputes, the programmer wins at some point. Yes. This was like a Les Moonves annual tradition at CBS back in the day. There would be a carriage fight. He would ask for all sorts of outrageous demands. And he'd time the deal to football season. And if you were Comcast or Charter or any company, you have angry customers saying, why can't I watch football on Sundays? Yes. It was part of the model. Especially when he was trying to get retransmissions feeds. which is a subject so boring, we do not need to go into it. No, but important because he invented a new fee and he got everyone to pay it.

8:36So, yes. Related question, who do you think is winning in the court of public opinion? That is a good question because I actually also think that it's YouTube, which is different than usual because in traditional carriage disputes, everybody hates their cable company. They just don't care and they're like, whatever, if I can't get it here, Maybe I'll switch. And it was harder to switch back in the day. But the sentiment towards the traditional cable companies was always so negative. And who is Disney? Disney is Peyton Manning. Disney is Quinta Brunson. Disney is Joe Buck and Troy Aikman. All of these personalities you know and you want the content.

9:17And they always had the advantage because they could go right to people and say, listen, these stars are telling you this carriage dispute is hurting everybody. So settle it. and they had the kind of bully pulpit. Now, I think the sense of people generally like YouTube. They generally think that YouTube TV, Craig's one of them. He's praised YouTube TV on this show because it's cheaper. It's the best. It's not cheaper. It's just now, it used to be cheaper. But not as much cheaper as it was. It really is just a good product. And so I'm one of them where like, I have YouTube TV and I have now had to miss a national Laker game.

9:53I won't be able to watch Monday Night Football tonight. and I'm not switching to another inferior provider. Do you agree, though, that the balance of power shifts then when the sentiment towards the provider is more positive than it used to be? Somewhat, yeah. Yeah, it's still not Peyton Manning say, like, call your cable company. I don't get the sense that people are mad at Disney and blaming them for the fight, per se. But I don't think it's as obvious that people are going to blame YouTube as it might have been with one of the other cable companies. Yeah, I mean, our frequent guest, Rich Greenfield, said, this dispute is not that painful for Google.

10:35Two weekends without college football and two weeks without Monday Night Football, as long as their consumers stay with them, it's fine. I don't know. More than that, I think it's going to be a problem, but okay. Yeah, look, I think if you are a YouTube TV customer and you essentially, ESPN, for all of its kind of bigger existential problems, has the best collection of sports in the world. And it's especially true right now in the fall between college football, pro football, start of the NBA season. Yeah. And I get the argument. They have had to pay through the nose to keep and expand these offerings.

11:10So why shouldn't the carriers pay more? Yeah. And the other argument would be, well, you can then just go, ESPN just launched their sports service. And okay, ABC, FX, that stuff all matters a little bit. But the real issue here is live sports. That's what people are using YouTube TV for. You can buy ESPN, the standalone streaming service. That has led to some conspiracy theory thinking that maybe Disney wants this to drag on. Maybe they want to direct more people to ESPN app and to Hulu Live, to Fubo, these services that they own and are essentially competing with YouTube TV now. Do you believe that?

11:53No, not really. I don't either. I mean, by most estimates, it's a$2 billion a year deal with YouTube TV. Like you don't put that kind of money at risk to prop up your new streaming service. What do you think is more likely for someone to switch from YouTube TV to another service or to sign up for ESPN? I actually think signing up for ESPN might be popular because it's easy. It's exactly what you want. Damn it. I can't watch Monday Night Football. How do I watch it? Oh, just sign up for ESPN. And maybe I'll keep it. Maybe I'll turn it off once this fight is over. Yeah. I met one of my first Fubo customers last night.

12:35Oh, you did? Yeah. Give us the demo. 30s. Like my contemporaries, my peers. It was a good friend of Camilla's and her husband. And did you do a proper interview? Like, why did you sign up? How did you know about it? I really wanted to, but it was the end of a dinner party. And I also was trying to think about a way to phrase it where I didn't feel like a dick being like, wait, you are a Fubo customer? You didn't drop everything and say, hold on, we need to have a real interview here. So when Comcast and YouTube TV were in a dispute earlier this year, right, it was over this thing called ingestion.

13:10We don't need to re-explain. There have been fights between kind of Spanish-speaking networks and over tiering and all of that. The thing that I still don't quite understand in this case is they're saying it's just all about rates. And if it's really just about money, that's not the basis for this big of a dispute. Just to be clear, Disney is saying that they are offering what they call fair terms that are in line with more than 500 other distributors that have renewed their agreements since last summer. Now, YouTube says that that is, quote, fundamentally misrepresenting the facts. They say that they're asking YouTube to pay a rate that is above what Charter and DirecTV pay for the ABC networks and a rate that is higher than what they charge Hulu and Fubo, which Disney owns.

14:02But still, you're basically arguing over a few cents a month or a dollar. I don't know the exact terms, but usually that is something that negotiations solve. Unless you're YouTube and you're like, whatever. Yeah. But obviously, YouTube and Google come from, in the broader sense, a position of power. But do you feel that all of the fights that they're... Because when a lot of these... Remember back in the day, we had these so-called skinny bundles, right? That were supposed to improve upon cable by giving you fewer channels at a lower price. That's what these negotiations are all about typically now.

14:41It's like the whole Warner thing where they had to renew but offer their streaming service as part of the package. And Disney has done that where they offer Disney Plus ad tier as part of Spectrum now. as that was in the negotiation. But do you, because YouTube is the, YouTube more so than Disney is the company that has been in dispute after dispute this year. Do you see that as a sign that they are under pressure to turn that into a profitable division? Or you just think it's, they're using their market power for the hell of it? Because there's a way of framing it where it's like, it's not from a position of strength.

15:15It's from a position of sort of corporate pressure. I think they are used to being the 800 pound gorilla in negotiations, whether it's for advertising terms or, you know, they are the biggest player in that space, in the media space. And when a company like Disney comes along and expects to be treated better than other media companies, you have Google saying, well, why? Like, why? We're the largest media company by every single metric now. So why should Disney get special treatment here, right? Yeah, could be. And the question is, how does Disney hurt them? The only way is sports fans getting fed up and blaming YouTube.

15:57You think so? I mean, there are other ways Disney could pull its content off of regular YouTube. You know, Pat McAfee has a pretty big channel on YouTube. There's a lot of Jimmy Kimmel highlights on YouTube. Does that hurt them? I don't think so. First of all, there is no one media company where if they took their stuff off of YouTube, it would matter to YouTube. I was having this conversation with someone recently. The only way it would hurt YouTube is if it led to a cascade of companies doing that. Basically, every major Hollywood company pulled this stuff off YouTube. And one, to be clear, it still wouldn't really damage the business of YouTube very much, but it would be a huge reputational risk.

16:37And maybe advertising, they sell ads at a higher clip on that content than they do on some of the user-generated stuff. But the odds of that happening are infinitesimal, if not zero. Why would the others do that? And even within the Disney ecosystem, is the talent going to be okay? Let's say you have a new show coming up and you need to use YouTube to promote it with the trailers and all that. Are you going to be okay? Is the creator of that show going to be mad? It's sort of like the Taylor Swift TikTok question. Yeah. And we saw how that ended up. Now, there's probably no single artist with Taylor Swift's pull in the Disney portfolio.

17:13Leo? Yeah, Disney is not the Taylor Swift of video. There are lots of different players. And I'm sure if you are Comcast and NBC Universal, you're looking at this standoff as a plus for you. You know, people can't watch Monday Night Football. They're maybe more likely to watch Sunday Night Football or watch clips of their shows on YouTube or something like that. Yeah. Do you think that like with some of the filmmakers who where YouTube matters, but not like so much for voting movie, like if Disney had to go to Jim Cameron and be like, We know we have the new avatar and we'd be coming out, but we just, we're not going to have a YouTube presence.

17:45Do you think he would care? Yes, I do. Yeah. Because filmmakers want their movies to be promoted wherever possible. YouTube is the biggest promotional platform for movies because the trailers are viewed millions and millions of times and you want every advantage you can get when you're a filmmaker. So how does this end, Lucas? Who bends first? Is this the government shutdown where the Democrats will, you know, cave at the end? As soon as they get through the midterms, they say, we don't want to do this anymore. Right. Or not. Sorry, not the midterms, but whatever. You get what I'm saying. The election.

18:18The election. I don't know the answer to that. You don't have to know the answer. I don't see how Disney can really cave. No? You are right that ultimately, if we want to make the government comparison, like YouTube is probably the Trump in this circumstance, where they're just like going to say, fuck it. You don't want it. Like, deal with it. But Disney has to be very careful about the precedents that it sets. Yeah, it's their core business. Are there any larger implications here outside of this is just another typical carriage dispute? What it suggests is a future in which big tech owning media and owning distribution is going to squeeze content owners wherever they can.

19:01And we are headed to more of these and the balance of power shifting even more, in my opinion. Well, and the problem for Disney and others is that even though the growth of YouTube TV has slowed a bit, it feels inevitable that YouTube TV will be the number one live TV service. And when you factor in all the other key touch points they have, the control and power that they have over these other companies just grows by the day. We are entering a world where Amazon and YouTube and Google and to some extent Roku, though I don't think Roku has nearly as much power, are the new Comcast Charter gatekeepers.

19:42Only they aren't just these neutral distributors. They basically fully encircle the content holders. And you fold in AI too. and that kind of power is pretty scary when you're a media company because you know what if youtube decides that they're just not going to serve the avatar trailer to any users who would normally get it they could do that not saying they would they're not going to do that not going to do but they could if it were elon musk running it he would yes well elon musk is pettier than the people who run google but what i'm saying is that that is the power dynamic that disney is dealing with you.

20:22Yeah, and we'll see. Iger's on the Manning cast tonight, so maybe he'll have a big announcement.

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22:22The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. To learn more, check out Accenture.com slash Spotify. All right, the other big news last week, our guy, David Zasloff, CEO of Warner Brothers Discovery, he had an earnings call, disclosed$150 million loss for the third quarter. But stock price keeps going up, not because of any fundamentals at the company, but because they're for sale. And the news headlines keep dropping about Netflix hiring a banking firm to look at the financials. Comcast is interested in parts of the business.

23:02You gotta feel bad for Mike DeLuca and Pam Abdi at Warner Brothers. They had an excellent quarter. They had Superman, they had weapons, They had conjuring all hits. And then the earnings come out. This company is now divorced from its financials and is now trading and valued solely on whether it will be sold. Yeah. Well, look, the studio numbers were really good. And I think that that did fuel the optimism for the sort of if they go forward with the spin, the studios and streaming segment, right? Like it's, it's weird to see the streaming business being flat and the studio business grow, growing by a lot.

23:43But yeah, that their TV, this company is always traded on the TV business and the TV business is a disaster. So it's just funny now. I mean, you didn't you, you wrote in your newsletter last week that there's like a win for David Zaslav. I actually did think that, and I've had this conversation with people around it and in the Paramount's guidance portfolio. I think that there has been a moment where he was winning the publicity war. Really? Yeah, for a little bit there. Give me evidence here. Because he's convinced people that there's going to be a bidding war for his company? Because Paramount had to increase its offer three times and will have to do so again if it wants to get the deal done.

24:22Okay, but that's, I don't know, I feel like that's to be expected. This is going to be a back and forth for the next three months of, oh, will they go higher? Who else is in? They're kicking the tires. Paramount has put him in a position where they now have to really explore a sale in a way that David Zaslav did not want to. But I do think that a lot of the press has talked about there being various suitors and the price having to go up. And even if a lot of those suitors aren't real, he has put Ellison in a position where he'd have to come in at a pretty big number to get the deal done, unless he can be patient and say, oh, you think you have a better solution?

25:01You go ahead and do it. But if he wants it now, he will have to pay more than I think he thought he would initially. I think you and I, if we hired bankers, could approach Warner Discovery and they would let us see their financials. That is certainly true. It's actually not a bad strategy. Go to some banking sources and say, like, will you front us? To look at the numbers? Yes, let us look at the numbers. Who can you get us a bunch of debt from? Yeah, exactly. We'd probably have to sign NDAs, though. That's not really what we'd want to do. No. But all right, Lucas, thanks for coming on. Thanks, Pat.